Earnings call transcript: Hallador Energy beats Q1 2025 expectations, stock surges

Hallador Energy Company (NASDAQ:HNRG), with a market capitalization of $656 million, reported its Q1 2025 earnings, surpassing analyst expectations with an earnings per share (EPS) of $0.23, compared to a forecasted loss of $0.13. Revenue reached $117.8 million, exceeding the anticipated $100.25 million. Following the announcement, Hallador’s stock rose 4.67% in aftermarket trading, closing at $15.90. According to InvestingPro, the stock has delivered an impressive 142% return over the past year.

Key Takeaways

• EPS significantly beat expectations with a $0.36 surprise.
• Revenue grew 5.6% year-over-year and 24.2% sequentially.
• Stock price increased by 4.67% in aftermarket trading.
• Operating cash flow and adjusted EBITDA saw substantial improvements.
• The company reduced its bank debt by nearly half.

Company Performance

Hallador Energy delivered a robust performance in Q1 2025, with substantial improvements across key financial metrics. The company’s revenue increased to $117.8 million, a 5.6% rise from the previous year and a 24.2% jump from the previous quarter. Net income reached $10 million, marking a significant improvement from prior periods. The company also highlighted its strategic initiatives, including exploring natural gas co-firing and potential acquisitions.

Financial Highlights

• Revenue: $117.8 million, up from $111.6 million YoY and $94.8 million QoQ.
• Earnings per share: $0.23, compared to a forecast of -$0.13.
• Net income: $10 million, a notable improvement from previous quarters.
• Operating cash flow: $38.4 million, up from $32.5 million in Q4 2024.
• Adjusted EBITDA: $19.3 million, significantly higher than $6.2 million in Q4 2024.
• Total bank debt reduced to $23 million from $44 million at the end of 2024.

Earnings vs. Forecast

Hallador Energy’s Q1 2025 EPS of $0.23 exceeded the forecasted loss of $0.13, resulting in a positive surprise of $0.36. This marks a substantial turnaround compared to previous quarters, where the company faced challenges in meeting expectations. The revenue of $117.8 million also surpassed the forecast of $100.25 million, reflecting strong operational execution.

Market Reaction

Following the earnings announcement, Hallador’s stock experienced a 4.67% increase in aftermarket trading, reaching $15.90. This movement contrasts with the day’s earlier decline, where the stock closed at $15.31, down 0.91%. The aftermarket surge indicates positive investor sentiment driven by the earnings beat and improved financial metrics. InvestingPro analysis suggests the stock is currently trading above its Fair Value, with the price near its 52-week high of $15.74. Subscribers can access 12 additional ProTips and comprehensive valuation metrics through the Pro Research Report.

Outlook & Guidance

Looking forward, Hallador Energy remains optimistic about its long-term growth prospects. The company plans to increase coal production in late 2025 and 2026, while exploring new energy supply opportunities for data centers and manufacturing. Operating with a moderate debt-to-equity ratio of 0.55 and generating $68.8 million in EBITDA over the last twelve months, the company’s financial position supports its expansion plans. The company’s guidance for future quarters reflects a cautious yet positive outlook, with projected revenue and EPS improvements. For deeper insights into Hallador’s financial health and growth potential, investors can access the detailed Pro Research Report available on InvestingPro.

Executive Commentary

CEO Brent Bilsland emphasized the company’s strategic positioning in the energy market, stating, "We continue to see growing demand for reliable power, particularly as grid volatility grows." He also highlighted the company’s ability to transform underperforming assets, adding, "We are uniquely positioned to transform underperforming or retiring assets."

Risks and Challenges

• Market volatility: Changes in energy prices and demand could impact financial performance.
• Regulatory changes: Potential shifts in energy policies could affect operations.
• Operational risks: Maintenance and production targets need careful management.
• Competition: Increasing competition in the energy sector could pressure margins.
• Economic conditions: Broader economic factors may influence demand and pricing.

Q&A

During the earnings call, analysts focused on Hallador’s negotiations with a global data center developer and the potential extension of exclusivity periods. Questions also addressed the company’s exploration of natural gas co-firing capabilities and long-term energy sales structures, reflecting investor interest in strategic initiatives and growth potential.

Full transcript - Hallador Energy Company (HNRG) Q1 2025:

Conference Operator: Good afternoon. Thank you for attending Hallador Energy’s First Quarter twenty twenty five Earnings Conference Call. At this time, all participants are in a listen only mode. Later, we will conduct a question and answer session and instructions will follow at that time. As a reminder, this call may be recorded.

I’d now like to turn the conference over to Sean Mazuric, the company’s Investor Relations Advisor with Elevate IR. Please go ahead, Sean.

Sean Mazuric, Investor Relations Advisor, Elevate IR: Thank you, and good afternoon, everyone. We appreciate you joining us to discuss our first quarter twenty twenty five results. With me today are President and CEO, Brent Bilsland and CFO, Margie Hargrave. This afternoon, we released our first quarter twenty twenty five financial and operating results in a press release that is now on the Hallador Investor Relations website. Today, we will discuss those results as well as our perspective on current market conditions and our outlook.

Following prepared remarks, we will open the call to answer your questions. Before we begin, a reminder that some of our remarks today include forward looking statements subject to a variety of risks, uncertainties and assumptions contained in our filings from time to time with the SEC and are also reflected in today’s press release. While these forward looking statements are based on information currently available to us, if one or more of these risks or uncertainties materialize or if our underlying assumptions prove incorrect, actual results may vary materially from those we projected or expected. In providing these remarks, Alador has no obligation to publicly update or revise any forward looking statements, whether as a result of new information, future events, or otherwise, unless required by law to do so. And with the preliminaries out of the way, I’ll turn the call over to President and CEO, Brent Bilgelin.

Brent Bilsland, President and CEO, Hallador Energy: Thanks, John, and thank you, everyone, for joining us this afternoon. We are pleased with our first quarter performance as we returned to top line growth and saw material improvements in our bottom line and cash flow generation, underscoring the strength of our strategic shift to a vertically integrated independent power producer. January and February offered a strong backdrop as a combination of colder weather and higher energy pricing enabled us to benefit from increased dispatch volumes. We also saw improvement in our coal production through the first three months of the year as our 2024 restructuring efforts continue to take hold. During the quarter, we leveraged our strong counterparty relationships to strategically deploy targeted firm energy sales, helping to offset price volatility and weather related demand fluctuations.

This enabled us to maximize the value of our Meron power plant in a way that balances challenging periods while also gives us flexibility to capture upside opportunities in periods of elevated pricing, like what we saw in January and February. Before diving into our first quarter operational highlights, I’d like to provide an update on our ongoing negotiations with a leading global data center developer. We’re making meaningful progress in our negotiations for the long term supply of capacity and energy from our facility. We understand that our partner has demonstrated their commitment to the opportunity through significant investment around land, transmission capacity and equipment, as well as the previously announced exclusivity agreement with us that runs through early June of twenty twenty five. Given the inherent complexity of these multi party agreements, at this time, it is uncertain whether we will execute definitive agreements before the current exclusivity period expires.

We are actively evaluating whether to agree to our counterparty’s request for an additional exclusivity period. In the event the current exclusivity period expires without definitive agreements or an additional exclusivity period, we would continue negotiations on a nonexclusive basis while evaluating proposals from interested third parties. During the last several months, we have received multiple unsolicited third party inquiries with respect to the availability of our future energy and capacity. Ultimately, we remain well positioned to execute a strategic transaction that delivers long term value to our shareholders. Stepping back to the broader market, we continue to believe that the prevailing industry trend of retiring dispatchable generators, such

Nick Giles, Analyst, B. Riley Securities: as

Brent Bilsland, President and CEO, Hallador Energy: coal, in favor of non dispatchable resources like wind and solar, will lead to an unbalanced energy equation and extended volatility in the energy markets. We believe this volatility makes our subsidiary, Howard or Power, much more valuable due to the enhanced reliability we provide versus non dispatchable generators. To further capitalize on these dynamics, we are actively exploring opportunities to acquire additional dispatchable assets that will enhance our scale and diversify our revenue streams while reinforcing our position in the evolving energy market. Hallador is uniquely positioned to transform underperforming or retiring assets to serve high growth end users such as data centers and onshore manufacturing with limited impact to retail customers. This model for growth is enabling us to continue our shift away from the discounted pricing related to our 2022 plant acquisition to higher wholesale market pricing next year and ultimately to premium pricing associated with supporting data centers and other large load end users.

Notably, the positive momentum that we are seeing from the current administration on both the federal and state levels should make transactions of this sort more feasible than they would have been under prior administration. We are also currently evaluating the addition of natural gas co firing at Merum. While we are still in the evaluation process, by adding the capability to co fire with gas and or coal, we believe it will provide fuel flexibility to our counterparty while also providing Hallador with the ability to capitalize on the best fuel cost scenario and better control our operating expenses. Additionally, we believe that the ability to co fire with natural gas and or coal will also provide increased resiliency in times where gas availability is limited, as we have seen in various winter storms across the last several years. Moreover, leveraging coal supply from our own operations at Sunrise could help manage input costs by providing what is essentially an at cost fuel supply, providing a release valve if third party fuel pricing gets out of control while also supporting our local workforce.

From a pricing standpoint, forward indicators continue to trend positively. The forward power curves indicate that the margins earned on energy produced at Merum and the value of accredited capacity sales assigned to the plant continue to increase. As we saw in the most recent MISO auction, where accredited capacity sold at prices in excess of $600 per megawatt day in the highest demand summer season. We are seeing strong indications for both energy and capacity prices in 2025 and beyond, and we’re encouraged by our negotiations related to supporting the data center development within the state of Indiana for many years to come. Subsequent to quarter end, we completed scheduled maintenance on one of our units at the plant.

Our second unit is currently undergoing scheduled maintenance and is expected to return online July 2. We typically schedule these outages during shoulder seasons when pricing tends to be lower, and we generally limit our firm electricity sales during these periods to guard against any unforeseen forced outages. Despite these outages, we’ve already contracted approximately 3,000,000 megawatt hours for the balance of 2025 at an average price of $37.20 and 3,400,000.0 megawatt hours for 2026 at an average price of $44.43 reflecting strong market demand and pricing momentum. Following 2026, we are optimistic that we can sell energy at higher prices in support of data center development and or to traditional wholesale customers. Shifting to our coal operations, we continue to see improvements from the restructuring of our Sunrise Coal division announced in early twenty twenty four.

We spent the majority of last year optimizing production, headcount, and strategy to best support our electric operations and our existing third party contracts. Looking ahead, this restructuring should provide us with greater flexibility to quickly scale if we see coal prices increase to a point that justifies restarting production at our more expensive units. With renewed support at both the federal and state levels for coal mining and coal fired power generation, as well as improving market dynamics, we believe that we are well positioned to pursue growth and or expansion opportunities, including the potential to increase our coal production in the back half of twenty twenty five or 2026 if the market supports doing so. In the meantime, we expect to produce approximately 3,800,000 tons of coal this year, having delivered 1,100,000 tons in the first quarter to Miriam and other customers. We supplement our own coal production with low cost third party purchases to diversify supply, enhance sales flexibility, and optimize fuel costs and margins at Merrell.

Looking ahead, we continue to see growing demand for reliable power, particularly as grid volatility grows with the retirement of dispatchable generation and a demand growth environment. This demand paired with supportive regulatory sentiment and Hallador’s ability to deliver dependable energy positions us well for sustained growth. Our pursuit of dual fuel capabilities and potential acquisition of other dispatchable generation assets reflects our confidence in the long term economics and viability of our platform. With a robust contracted sales book, strengthening fundamentals, and ongoing interest from high demand end users, we believe we are well positioned to materially strengthen our opportunities for growth and cash flow generation for many years to come. I will now hand the call over to our CFO, Margie Hardraig, to take you through our financial results.

Margie?

Margie Hargrave, CFO, Hallador Energy: Thank you, Brent, and good afternoon, everyone. Jumping right into first quarter results. On a segment basis, electric sales for the first quarter increased to $85,900,000 compared to $69,700,000 in Q4 and $60,700,000 in the prior year period, while coal sales were $54,800,000 for the first quarter compared to $42,400,000 in Q4 and $66,000,000 in the prior year period. The increase in electric sales was primarily due to new contracts entered into in Q1 twenty twenty five that were not in effect in 2024, as well as higher energy pricing and dispatch volumes. The expected year over year decline in coal sales was driven by our decision to reduce coal production as part of the restructuring of our Sunrise Coal division.

On a consolidated basis, total operating revenue increased to $117,800,000 for the first quarter compared to $94,800,000 in Q4 and $111,600,000 in the prior year period. Net income for the first quarter improved to $10,000,000 compared to net losses of $215,800,000 in Q4 and January in the prior year period. The large loss in Q4 was primarily driven by a non cash long lived asset impairment for Sunrise Coal. Operating cash flow for the first quarter increased to $38,400,000 compared to $32,500,000 in Q4 and $16,400,000 in the prior year period, with the increase driven by higher power pricing and improved coal mining margins in the first quarter twenty twenty five. Adjusted EBITDA, a non GAAP measure, which is reconciled in our earnings press release issued earlier today, increased significantly to $19,300,000 for the first quarter compared to $6,200,000 in Q4 and $6,800,000 in the prior year period, reflecting the improving trends in our power business.

We invested $11,700,000 in capital expenditures during the first quarter of twenty twenty five, compared to $14,900,000 in the year ago period. As of 03/31/2025, our forward energy and capacity sales position was $630,400,000 compared to $685,700,000 at the end of Q4 and $657,500,000 as of 03/31/2024. When combined with our forward fuel sales of $422,700,000 as well as intercompany sales to Merum, our total forward sales book as of 03/31/2025 was approximately $1,500,000,000 During the first quarter, we reduced our total bank debt to $23,000,000 compared to $44,000,000 at 12/31/2024, and $77,000,000 at 03/31/2024. Additionally, we did not utilize our ATM program in the first quarter and have not utilized it since Q2, twenty twenty four. Total liquidity at 03/31/2025 was $69,000,000 compared to $37,800,000 at 12/31/2024, and $39,500,000 at 03/31/2024.

This concludes our prepared remarks. We will now open it up for questions from those participating in the call. Operator, back to you.

Conference Operator: Thank you. Our first question comes from the line of Nick Giles of B. Riley Securities. Please go ahead, Nick.

Nick Giles, Analyst, B. Riley Securities: Thank you, operator, and good afternoon, everyone. Brent, if I heard correctly, sounds like there was a request for an extension of the exclusivity period, but you may consider not renewing exclusivity, given other unsolicited offers. So, you know, given that you appear to be in the late innings of a deal with the initial counterparty, how should we think about renewing versus not? What would other potential customers ultimately compete on? Thank you.

Brent Bilsland, President and CEO, Hallador Energy: Yeah, thank you, Nick. Look, we’ve said it’s uncertain whether the deal gets done before the expiration. Our counterparty has requested that we agree to an extension. And we’re evaluating if that’s something that we want to do or not. We feel really good about this.

Made a lot of progress, but we’re also encouraged by the interest that we see from other parties. And so, as we continue to make progress over the next month, we’ll evaluate whether it’s in our shareholders best interest to grant an extension or to continue to negotiate non exclusively while entertaining other interests.

Nick Giles, Analyst, B. Riley Securities: Thanks for that, Brent. And maybe just as a follow-up, you know, with the EPR submitted by Hoosier having received approval, I have to imagine, you know, really a key hurdle has been cleared in reaching a definitive agreement. So just curious how you would describe final steps from here. Are there any other major considerations with the initial counterparty? Or would you describe it as down to the final details?

Brent Bilsland, President and CEO, Hallador Energy: Yeah, again, deal is in front of the meter. And so what you’ve seen with Hoosier is a powered land development. We’ll be selling to the bus bar. And so as long as the power is taken somewhere in MISO Zone 6, which is pretty much the entire state of Indiana and Northern Third Of Kentucky, we don’t really it’s not of great importance to us where the power is taken off. So I don’t want people to get overly focused on one powered land opportunity and assume that that’s us or our only opportunity.

As far as where the negotiations are, yeah, I think most of the major points have been negotiated. And we’ve made great progress with the utility, with the developer. I really think it’s more down to the hyperscaler negotiating the finer points of the transaction with the developer and making sure all of those points align with all four counterparties.

Nick Giles, Analyst, B. Riley Securities: Brent, that makes sense. And one more if I could. I mean, it’s good to hear an update on the potential to co fire with natural gas. I was just wondering if you could add any color around potential timing, capital intensity. If I remember correctly, was a requirement to do something like this early in the 2030s.

But it sounds like you may be pulling that forward now. So appreciate any additional color.

Brent Bilsland, President and CEO, Hallador Energy: Yeah, mean, law says that we must co fire by 02/1932. We expect the Trump administration to probably roll that back. That being said, we’ve said for quite some time, we feel that either the government at some point will require us to put a gas line tomorrow, or the customer will pay us to do so. And so we feel it was appropriate to begin analyzing this process so that we can better update the shareholder on capital cost, timing, feasibility, that sort of thing. We think the project is very feasible.

We’ve hired a contractor to analyze it that has been successful in co firing other coal fired power plants across the country. And everything we’re hearing to date is very positive towards our situation. We think it’s probably something that’s very feasible and probable to be able to be accomplished in a reasonable time frame. So it’s something we’re evaluating from now. We expect to update the shareholders more on that in the future, but we’re still in the early innings of that process.

Nick Giles, Analyst, B. Riley Securities: Got it. Got it. No, that’s helpful. Maybe if I could, just a clarifying question. I mean, talked in the past about the advantage of contracting energy sales on a contingent basis.

So I was wondering if you could clarify whether any long term deal,

Sean Mazuric, Investor Relations Advisor, Elevate IR: with a hyperscaler or the likes,

Nick Giles, Analyst, B. Riley Securities: you know, should we think of this as contingent? Should we think about this as a firm basis? Just how should we think about structure here?

Brent Bilsland, President and CEO, Hallador Energy: Yeah, we’ve negotiated that structure to be a unit contingent basis for well over a decade in length.

Nick Giles, Analyst, B. Riley Securities: Got it. Okay. Well, Brent, I really appreciate all the color. If there’s I’ll go ahead and jump back in the queue. But if there aren’t any other analysts, then please, operator, let know, I’ll continue to ask a couple more if that’s Okay.

Brent Bilsland, President and CEO, Hallador Energy: All right. Thanks for your interest, Nick.

Conference Operator: Thank you. Ladies and gentlemen, this concludes our question and answer session and today’s conference call. Thank you for participating. You may now disconnect.

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